2009 (12) TMI 882 - HC - VAT and Sales Tax

Whether, the Karnataka Appellate Tribunal was right in law in confirming the order dated May 13, 2005 of the JCCT (Appeals), Bangalore City Division 1, Bangalore holding that the provisional assessment order passed was valid under section 5C of the Karnataka Sales Tax Act, 1957? Whether the Karnataka Appellate Tribunal was right in law in confirming the order dated May 13, 2005 of the JCCT (Appeals), Bangalore City Division 1, Bangalore, holding the transaction between the petitioner and Mysore Construction Co., is liable for tax? Held that - The assessing officer was justified in excluding the turnover by relying upon section 5C of the KST Act. The Joint Commissioner of Commercial Taxes was also justified in dismissing the appeal and similarly the Karnataka Appellate Tribunal is also right in dismissing the second appeal of the assessee. In the result, the petition is dismissed and the questions of law answered against the assessee.

Summary

Issues:
1. Challenge to the assessment order under the Karnataka Sales Tax Act, 1957 regarding turnover inclusion under section 5C.
2. Dispute over the transfer of right to use goods in a business transaction.
3. Validity of the provisional assessment order under section 5C of the Karnataka Sales Tax Act, 1957.
4. Tax liability concerning a transaction between the petitioner and another party.

Analysis:
The case involved a revision petition challenging the assessment order passed by the Deputy Commissioner of Commercial Taxes, which was confirmed by the Joint Commissioner of Commercial Taxes and further upheld by the Karnataka Appellate Tribunal. The petitioner, a private limited company engaged in granite manufacturing and machinery hiring, disputed the turnover addition under section 5C of the Karnataka Sales Tax Act for the assessment year 2000-01. The appellate authority dismissed the appeal, leading to a second appeal before the Karnataka Appellate Tribunal.

The Tribunal considered whether the assessing authority was justified in levying tax under section 5C on the disputed turnover. The petitioner contended that there was no transfer of right to use goods as per section 5C, as they retained complete control over the machinery. However, the Tribunal dismissed the appeal, prompting the petitioner to file a revision petition raising questions of law regarding the validity of the assessment order and the tax liability concerning the transaction with another party.

The court analyzed the facts, emphasizing that the petitioner failed to provide agreements or evidence showing the nature of the transaction with the other party. Based on the bills raised by the petitioner, the court assessed whether the turnover fell within section 5C. The court noted that without proof of transfer of right to use goods, it was difficult to rely solely on the bills raised by the petitioner. Consequently, the assessing officer's decision to exclude the turnover under section 5C was deemed justified, upheld by the Joint Commissioner of Commercial Taxes and the Karnataka Appellate Tribunal.

Ultimately, the court dismissed the petition, answering the questions of law against the petitioner. The judgment affirmed the validity of the assessment order under section 5C and upheld the tax liability concerning the disputed transaction, concluding the legal proceedings in favor of the tax authorities.